UK stocks fall after Bailey’s hawkish tone on interest rates
London: UK’s FTSE 100 fell on Friday, but was set for weekly gains, as investors were spooked after Bank of England Governor Andrew Bailey said that monetary policy will continue to be restrictive.
The commodity-focussed FTSE 100 (.FTSE) was down 0.1%, while the mid-cap index FTSE 250 (.FTMC) lost 0.5%. Both indexes are on track to mark their best weekly performance in four weeks.
BoE Governor Andrew Bailey said on Friday that future interest rate decisions by the central bank would continue to be tight after officials voted to leave borrowing costs on hold last month by the tightest of margins.
The yield on the UK benchmark bond edged higher after Bailey’s comments but remained lower for the day at 4.402%.
Among sectors, precious metal miners (.FTNMX551030) added 2% to lead sectoral gains as gold prices climbed amid tensions in the Middle East and hopes that U.S. interest rates may have peaked.
“Although higher dollar and yields would typically weaken gold, the geopolitical concerns are pushing gold higher,” said Giles Coghlan, chief market analyst at GCFX.
Industrial metal miners (.FTNMX551020) also advanced 0.6% following a rise in copper prices.
Mining stocks were also supported by a softer dollar and lower Treasury yields.
Heavyweight oil and gas shares (.FTNMX601010) were up 1.4%, as oil prices rose about $1 per barrel on growing supply concerns.
“Iran hinted at potential involvement in the Israel-Hamas conflict which could lead to U.S. sanctions, impacting oil supplies across the world,” said Coghlan.
Shares of oil majors Shell (SHEL.L) and BP (BP.L) rose 1.1% and 2.2%, respectively.
UK wealth manager St James’s Place (SJP.L) was pushed by regulators to overhaul fees, with the stock tumbling 13.5% to the bottom of the FTSE 100.
Fund manager Ashmore (ASHM.L) slipped 5.6% to the bottom of the FTSE 250 as its assets under management declined in the September quarter amid subdued market conditions due to weaker China economic data and high interest rates.